PredictIt to Liquidate Political Market if Injunction Bid Fails, May Reinvent Itself

Posted on: January 20, 2023, 04:13h. 

Last updated on: January 26, 2023, 04:31h.

Steve Bittenbender Read More
Expertise: Legislation, Sports Betting, Horse Racing.

Should a federal appeals court does not grant PredictIt an injunction to keep its political futures exchange open next month, the operator will look to reinvent itself, Casino.org learned on Friday.

PredictIt
A screenshot of PredictIt’s home page on Friday. A representative for the political futures exchange said Friday the market would liquidate if PredictIt did not get an injunction to keep trading active past a Feb. 15 deadline set by the CFTC. (Image: Predictt.org)

The US Fifth Circuit Court of Appeals has scheduled a hearing on Feb. 8 in New Orleans. It will hear PredictIt’s request to keep its exchange active past a Feb. 15 deadline. The Commodity Futures Trading Commission (CFTC) posted in its letter last year that it had rescinded the no-action status PredictIt’s founders received in 2014.

PredictIt, along with traders who use the exchange and professors who rely on the exchange’s data for research, filed the lawsuit in September to stop the CFTC from enforcing the revocation letter it sent on Aug. 4. In that notice, the federal regulator said PredictIt violated terms of the no-action letter. The commission added that existing markets, such as those for the 2024 presidential election, should be liquidated by Feb. 15.

If the court denies PredictIt’s request for an injunction, we will comply with the CFTC’s requirement to liquidate all remaining markets on or before Feb. 15,” PredictIt Public Relations Director Lindsey Singer, told Casino.org in an email Friday. “After Feb. 15, traders will continue to be able to withdraw any cash they may have on account with PredictIt, consistent with our terms and conditions.”

The original lawsuit was filed in the US District Court for the Western District of Texas. The plaintiffs took their motion for an injunction to the appellate level. That’s after US District Judge Lee Yeakel failed to make a ruling on the injunction, which was filed in September.

New Life for PredictIt?

PredictIt also sent out an update to its users on Friday regarding both the lawsuit and another venture that’s in the works.

Exchange officials are also working to establish a Designated Contract Market (DCM), which would be called PredictIt Exchange. The CFTC defines those as exchanges that can list futures “based on types of commodities” which could be bought and sold by any trader, including individual investors at any level.

“Political prediction markets are in our blood, and we’re working on other ways that we can offer new election markets for the current political season,” PredictIt said in its note to users.

Kalshi, which was denied its request to operate an exchange on congressional elections by the CFTC, is an example of a DCM. It offers futures contracts in several categories, including financial markets, climate, and entertainment. Kalshi also offers some political markets that aren’t based on elections, such as congressional action on the debt ceiling and whether the UDS government will shut down by Oct. 2.

“If approved, PredictIt Exchange would operate under DCM regulations which could potentially include political events like judicial nominations and Supreme Court decisions,” Singer said.

She added Aristotle International, the Washington, DC-based company that serves as PredictIt’s market service provider, has applied for DCM status and “that application is substantially complete.”

DCM Application Filed in October 2021

A check of the CFTC website shows an Aristotle Exchange application is currently pending. It was filed in October 2021. The address on that application matches the one for Aristotle International.

PredictIt was founded by Victoria University of Wellington in New Zealand for research purposes, and the school operates the exchange through Aristotle. Court documents in the lawsuit against the CFTC also describe PredictIt as a subsidiary of Aristotle.